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Budget 2017: Will young Australians get a health insurance discount?

Posted: 5 May 2017 7:11 am
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What is the Lifetime Health Cover Discount (LHCD)?

With tax time just around the corner and the federal government set to release its 2017 budget next week, the costs of health insurance are at the front of many people's minds. Not just because they will be able to claim a rebate for having private health insurance, but because of one of the recommendations in a pre-budget submission from Private Healthcare Australia (PHA).

PHA has suggested a review of the Lifetime Health Cover (LHC) policy to add a lifetime discount for people taking out private health insurance between the ages of 18 and 30 years.

The current LHC policy encourages people to get cover before their 31st birthday by creating a lifetime financial penalty if they don't. Anyone who first takes out private health insurance later than the first day of July following their 31st birthday is slugged with a 2% surcharge for every year they don't have cover, up to a maximum of 70%. It's a negative incentive: you'll likely pay less in the long run, but it doesn't offer any discounts at the time you actually sign up.

The proposed Lifetime Health Cover Discount (LHCD) would be a positive incentive, offering a 2% discount for every year someone takes out cover before their 30th birthday, capped at 10%. This discount would remain in place for as long as the person holds private health insurance continuously in Australia. The discount would be portable, meaning you could switch funds and still retain it.

PHA isn't the only organisation in the health insurance sector pushing the idea of an LHCD. In March Bupa weighed in on the topic, urging the government to consider the proposal to ensure costs for health insurance overall didn't rise excessively.

And this isn't the first time the concept of a LHCD has been floated by insurers. During the consultation period in 2015, then Health Minister Sussan Ley received proposals for a lifetime discount for younger members taking out cover.

Since 2010, Australians have seen their private health insurance premiums go up by almost 50%. However, as premiums have risen the private health insurance rebate has decreased. This, coupled with a stagnation in wage growth, has led to many Australians viewing private health insurance as being unaffordable.

If the LHCD is introduced it might entice some young people to take out cover and arrest a growing with private health insurance amongst Australians. There's no indication yet of whether this will actually appear in the budget, but we'll be keeping a close eye on it.

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